“We believe that the country (China) is now undergoing a significant deceleration in locally sourced output as quality domestic resources become scarcer. We believe Chinese refiners are increasingly blending dom..

21 Feb 2013

LONDON (Commodity Online): Despite great resource potential, government bureaucracy and local sensitivities have effectively stymied India’s bauxite/alumina expansions in the country.

It is likely that smelter production will move well ahead of domestic alumina availability requiring higher imports over the next several years, said Deutsche Bank in a report.

China--by far the largest producer of bauxite/alumina in the world--has witnessed a CAGR of 77% in alumina production over the past 10 years.

“We believe that the country is now undergoing a significant deceleration in locally sourced output as quality domestic resources become scarcer. We believe Chinese refiners are increasingly blending domestic bauxite with higher quality imports.” the bank noted.

The Bank sees the challenges facing both India and China as particularly supportive for the alumina market. In contrast with the above, the US is witnessing somewhat of a renaissance in alumina production as low energy costs have dramatically changed the production economics of once marginalised facilities.

Alumina supply from both Australia and Brazil could rise modestly over the next several years. This is not so much a function of expanding alumina production (there is little expected growth forecast for either after 2013), rather it is a function of the threat of further closures/idling of smelting facilities as cost pressures mount.

On this basis there is, in reality, little change in the net balance. The closure of the Gove refinery in Australia would have eliminated around 2.75mt of alumina production, government assistance has prevented this. Elsewhere however, alumina/bauxite supply has been challenged as costs and local disruptions have taken their toll including India and China.

Jamaica: a large traditional supplier; output is down about 40% from levels experienced in the iddle of the last decade. Cost is the problem and little change is expected.

Guinea: the Friguia refinery has been plagued by labour issues; risks are expected to remain elevated.